Tax_and_Governance

Tax and Governance Contents 1. Introduction - The motorist’s contribution to revenue 2. Fees and taxes paid by motorists 2.1 Revenue from motor vehicle license fees 2.2 Revenue from the fuel levy (fuel tax) 2.3 Revenue from Toll Fees 2.4 Revenue from Traffic fines 2.5 Revenue from CO2 tax 3. e-Toll (The recent Gauteng e-Toll topic) 3.1 Summary of the Gauteng Freeway Improvement Project (GFIP) 3.3.1 Quality of Life 3.3.2 Productivity 3.3.3 Development potential 3.3.4 Direct cost of travel 3.3.5 Environmental Impact Assessment (EIA) 3.3.6 Monitoring and Communication infrastructure improvement 3.3.7 Soccer World Cup 2010 influence on the GFIP 3.3.8 User-pay principle (e-Tolling) 3.3.9 Economic projections for Gauteng 4. Conclusion 5. References W The motorist’s contribution to revenue and e-Toll (The recent Gauteng e-Toll project) 1. Introduction - The motorist’s contribution to revenue The motorist contributes to the revenue of South African (SA) by paying the following fees and taxes, annual motor license fees, CO2 emission tax, the fuel levy (fuel tax) and toll fees when using various roads in the country. Revenue from fines are also payable when motorists are guilty of contravening the National Traffic Regulations e.g. exceeding the legal speed limit on public or national roads and carrying loads exceeding the legal carrying capacity of a vehicle. 2. Fees and taxes paid by motorists 2.1 Revenue from motor vehicle license fees A Motor vehicle license fee is payable annually. The cost is determined by the category of the vehicle. This ranges from motorcycles to heavy passenger and goods vehicles. The category of a vehicle is based on the number of axles, and their load carry capacity. The National Road Traffic Act (NRTA) defines the category of vehicle, (Minister of Transport, 1996). Funds generated from license fees form a direct revenue stream to the National Treasury. This contributes to the gross annual income of the country. According to the Road Traffic Monitoring Corporation (RTMC), as of December 2010, there are 9 829 400 registered vehicles on the South Africa roads. This increase by 2,52 per cent from December 2009, with significant contributions of increase in the motorcar and bus categories and a notably decrease in the number of motorcycles. The highest percent of motor vehicles are in Gauteng and Western Cape Province respectively. Attached are the data table and graph illustrating the percentage distribution for reference, (Road Traffic Management Corporation, 2010) W 2.2 Revenue from the fuel levy (fuel tax) The South African Petroleum Industry Association (SAPIA) is a body representing the collective interests of the of the South African petroleum industry. As stated by SAPIA, “The Association helps to address issues regarding refining, distribution and marketing of petroleum products. Also, promotes the industry’s environmental and socio-economic progress,” (SAPIA, 2007). “The fuel price in SA is based on a formula controlled by the Department of Energy,” says Avhapfani Tshifularo, Executive director of SAPIA, (SAPIA, 2007). According to Avhaphani, “Over 80 per cent of the price of fuel in SA is currently made up of government levies and taxes (29 per cent) and the Basic Fuel Price (BFP) 55 per cent. The BFP is based on the current prices quoted daily by the international markets. The remaining components, transportation costs, and industry margins make up the rest of the fuel price,” (SAPIA, 2007). Listed are all the levies and taxes included in the fuel price. Transportation and trading costs not included. 2.2.1 Equalization Fund "The Equalization fund levy is normally a fixed monetary levy, decided by the Minister of Minerals and Energy together with the Minister of Finance. The income from this levy is used mainly to equalize fuel prices. The levy is currently zero,” (APA, 2010). 2.2.2 Fuel Tax A tax levied on petrol and diesel fuels. The Minister of Finance decides the levy amount. 2.2.3 Customs Union Levy "A levy collected in terms of an agreement by the Southern African Customs Union,” (APA, 2010). W 2.2.4 Road Accident Fund Levy "The Road Accident Fund levy is applicable on both petrol and diesel fuel. The Minister of Finance decides the amount of this levy. The income from this levy is used to compensate third party victims of motor vehicle accidents,” (APA, 2010). Road Accident Fund is approximately 80 cents/litre for both petrol and diesel fuels. 2.2.5 Demand Side Management Levy (DSML) "A DMSL is applicable on 95 unleaded petrol used in the inland area. This levy was incorporated into the price of 95 unleaded petrol in January 2006, when it was initially introduced into the market. Most vehicles in this market are not required to run on this type of petrol and the unnecessary use will result in "octane waste" with negative economic consequences. A DMSL is used to prevent the demand thereof in this area,” (APA, 2010). 2.2.6 Slate levy “A levy paid by the motorists recovering money “owed” to the oil companies, due to the time delay in the adjustment of the petrol pump price,” (APA, 2010). 2.2.7 Illuminating Paraffin (IP) levy “This is to prevent the unlawful mixing of diesel and illuminating paraffin. An illuminating paraffin tracer dye is injected into illuminating paraffin. Tracer dye is factored into the price structures of diesel to finance related expenses,” (APA, 2010). 2.2.8 Petroleum Pipelines Levy The Ministers of Energy and Finance approve the Petroleum Pipelines Regulator’s annual budget. "In terms of the Petroleum Pipelines Levies Act, 2004 (Act No 28 of 2004), a levy of 0.19 cents/litre was implemented into the price structures of petrol and diesel on 7 March 2007,” (APA, 2010). W The following graphs illustrate the composition of petrol and diesel prices for the Gauteng Province. W 2.3 Revenue from Toll Fees The South African National Roads Agency Limited (SANRAL) manages the South African national road networks. The mandate according to the NRTA states, “SANRAL needs to make provision for, an agency to manage and control the Republic’s national roads system. To control the development, maintenance and rehabilitation of national roads within the framework of the government policy," (Chicago, 1998). By “Tolling” one only pays for the section of road used, this is also referred to as the “user pay” principle. Benefits of Tolling include efficient method to provide roads, which is quicker than the traditional tax based revenue method. Ensures dedicated funding for road maintenance. There are several types of Tolling: Traditional Toll Collection – "Is where the motorists stop along an open road or highway to pay a toll fee at a Toll Plaza at certain locations on route to their destination,” (APA, 2010). Electronic Toll Collection (ETC) - "This is a cashless transaction system on a toll road or highway. This can take place in many forms. The Current ETC methods include the credit card "swiping" and the use of an e-tag system at the at the toll plaza. The vehicle is required to reduce speed when approaching the toll booms. Once the transponder is identified by the technology mounted on the toll booth the boom will open allowing the vehicle to pass," (APA, 2010). Open Road Tolling - "Is a form of Electronic Toll Collection where the motorist is to stop at a toll booth or plaza to pay toll fees. There are overhead Gantries along the toll route, and technology fixed on these gantries, will photograph the front and rear of the vehicle and record the transponder (e tag) data in the vehicle – if there is no e tag, the vehicle is identified from the photographs," (APA, 2010). Illustration of Toll Fees W 2.4 Revenue from Traffic fines The Administrative Adjudication of Road Traffic Offences (AARTO) is a government body responsible for collection of all traffic fines. AARTO is to serve a mediation role between law enforcement and the adjudication process regarding traffic offences. Its mission drivers are justice, transparency, and fairness. The aim of AARTO is to, “increase the public awareness on fines which will encourage the road users to treat traffic offences and fines more seriously. It improves fine collection procedures, and is a revenue stream for improving road safety. AARTO has to introduce convenient methods for paying fines, and punitive measures for motorists not paying fines on time. Eventually leading to confiscation of movable property and declaring a user not fit to drive a motor vehicle. Briefly, AARTO is formed to, "improve law abiding and safer driving behavior in order to reduce road accidents,” (AARTO, 1998). W The following table is attached to give an understanding of the penalty structures and demerit points allocated per traffic offence. 2.5 Revenue from CO2 tax Consumers pay CO2 tax when purchasing a new vehicle. The tax is directly proportional to the CO2 emissions rating of the vehicle as determined by Treasury and the National Association of Automobile Manufacturers of South Africa (NAAMSA). According to the Gazette, “CO2 Taxation: September 2010/March 2011 implementation– 'The rate of emissions tax on passenger vehicles is R75 per gram CO2 emissions in excess of 120 g/km based on test reports. The rate of emissions tax on double cabs is R100 per gram CO2 emissions in excess of 175 g/km based on test reports. If no test report is available, the CO2 emissions will be calculated according to the following formula: Passenger vehicles < 3000 : 120 + (0.05 x ) = g/ CO2 Passenger vehicles > 3000 : 175 + (0.05 x ) = g/ CO2 Double-cabs: 195 + (0.07 x cm³) = g/km CO2”, (Government Gazette No.32443, 2009)”. W Attached is a table illustrating the Valorem tax current and proposed plus CO2 fuel tax payable when purchasing a new vehicle,” (APA, n.d.). According to NAAMSA, “the benefits of fuel economy labeling and recent CO2 taxation, cannot currently be determined, however it is likely that to drive vehicle design towards more fuel efficient technology,” (APA, 2010). NAAMSA also states, "that consumer behavior will unlikely be influenced in the longer term since the tax is not readily visible to the buyer", (APA, 2010). Comparison of locally specified vehicles with that of the EU indicates significant improvements in CO2/fuel economy are possible if supplied the appropriate fuel quality. W EU5 and EU6 engine emissions, released in Europe in 2009 and 2015 respectively, require minimum 50-ppm low sulphur fuels to operate. To fast track the introduction of low CO2 vehicles, it is crucial for South Africa to introduction the correct quality fuels. “It will then be possible to achieve the emission target,” (APA, 2010). For reference is the CO2 lable that is attached to all new motor vehicle front windscreens as from the introduction of CO2 tax 01 September 2010, (Government Gazette No.32443, 2009). W 3. e-Toll (The recent Gauteng e-Toll project) 3.1 Summary of the Gauteng Freeway Improvement Project (GFIP) An initiative of the South African National Roads Agency Limited () to improve the conditions of the national roads and reduce congestion in the Gauteng Province. The project will invest approximately R29 billion into the South African economy and projected to create nearly 30 000 direct jobs over its lifecycle. The project was named the Gauteng Freeway Improvement Project (GFIP) and was approved in cabinet (2007), by the Minister of Transport Mr. Sibusiso Ndebele and handed over to SANRAL CEO, Mr. Nazir Alli to commission. SANRAL, a state owned entity was established in 1998 and is accountable to the Minister of Transport. SANRAL has undertaken many projects since its inception, of which the GFIP is the current flagship project. SANRAL is caretaker of the country’s 16 150km network of non-toll roads and toll roads. The non-toll network is financed by the National Treasury grants and the toll network is funded via motorist toll fees. OUTA (Opposition to Urban Tolling Alliance), a civic action group of business associations and individuals, lodged a Founding Affidavit in the North Gauteng High Court. On 28 Apr 2012, Judge Prinsloo granted a temporary interdict for the e-toll scheduled launch on the 30 April. On 21 May 2012, Treasury filed an appeal in Constitutional court. OUTA plans to challenge appeal in the Constitutional court on 15 August 2012", (APA, 2010). W “Transport Minister Mr. Sibusiso instructs SANRAL to halt work on toll roads, 23 October 2011,” (Minister of Transport, 2011). “Mr. Nazir Alli informed Mr. Sibusiso Ndebele of his resignation, on 7 May 2012,” (Department of Transport, 2012). At a media after the verdict, the Opposition to Urban Tolling Alliance (Outa) said, "the ruling sent a clear message: “Government must realize they serve the people, and not the other way around", (OUTA, 2012). The Gauteng Freeway Improvement Project is on hold until the constitutional court has passed its verdict… 3.2 Background of Project "Gauteng, the economic hub of South Africa, generates nearly 38 % of the total value of South Africa’s economic activities. As a result, development in housing, offices, retail, and industrial properties has grown significantly over the past 10 years, resulting in above average traffic growth. Unfortunately, provision of road infrastructure has not kept up with the increased traffic demand, resulting in a road and freeway network that is over capacity," (APA, 2010). The GFIP comprised of various phases to upgrade and layout new freeways, which would give South Africa a total of 560km of freeway network. The first phase, comprising of 25 work packages involved the upgrading of 185km of the most congested freeways. Apart from widening of the freeways, the GFIP project will also ensure that bottlenecks at interchanges are resolved. For the first phase of the GFIP, 34 interchanges are significantly upgraded, including infamous interchanges such as the Allandale, Rivonia, William Nicol, Gilloolys and Elands interchanges. With the planning of the Gauteng Freeway Improvement Project, SANRAL took other transport modes into consideration (the Gautrain, Metrorail, and Bus Rapid Transport) and strived to create links with other transport modes to provide citizens with the choice of using public transportation or car-pooling that will alleviate congestion caused by single-passenger vehicles,” (Chicargo, 2010). When the Project (GFIP) and was approved in cabinet (2007),as per due process, SANRAL engaged with all stakeholders, advertising the details of the project, the intent to toll, the proposed toll points, expected toll tariffs, upon which the public were given the opportunity to comment. The Minister of Transport considered the comments where after the related road sections were declared as toll roads. W Following the declaration of these freeway sections as toll roads, SANRAL could continue to raise funding from the capital markets and procure contractors to commence with construction. According to Alli,"Once completed the GFIP initiative will integrates the Johannesburg, Ekurhuleni, and Tshwane metropolitan boundaries. It will increase freeway bi-directional lane capacity to four and some to six lanes. The first phase of the project is the upgrading of 185 kms of the existing freeway network. A further 376 kms of upgraded and newly constructed freeways is planned during the project life. The upgraded and expanded freeway network will significantly reduce traffic congestion and grant access to economic opportunities and social development projects. The network will be an interconnected freeway system of inner and outer ring roads, incorporating the historically neglected western and southern Gauteng settlements," (APA, 2010). However, Alli stated, “The most significant contribution the investment will make to ordinary citizens is the improvement of their quality of life and family time that an upgraded road infrastructure will deliver,” (APA 2010). 3.3. Gauteng Freeway Improvement Programme (GFIP) and its effect on society According to Dewald, “The congested and poor road conditions on the freeway network have the following effects the people of Gauteng and economy in the following way,” (Dewald, 2010). 3.3.1) Quality of Life Rapid traffic growth experienced over the past decade has negatively influenced peak period traffic. This increase results in a daily average increase of 3 hours for the motorist transiting between home and work, limiting private time for family and leisure. Public transport is thought to be non-road based, it should be remembered that the majority of public transport in South Africa is road based. The quality of life of many South Africans who are reliant on public transport are affected by traffic congestion. 3.3.2) Productivity Many productive hours are wasted on the Provinces roads due to the congestion during peak travel times. This is often exasperated by the many accidents, some due to driver, fatigue, intolerance and impatience, most of which is borne out of the peak traffic syndrome. 3.3.3) Development potential The current road capacity is incapable of supporting developments in the province, which negatively affects the sustainability of the region. Due to the inability of the current road network, Developers face additional financial costs to provide road infrastructure to support their projects. This is not viable for business and many projects are abandoned. W 3.3.4) Direct cost of travel Extended trip time and stop-go conditions increase fuel consumption, and vehicle wear and tear. A cost increase on the average motorist will be approximately R500 per month over and above their current fuel bill. Financial planning for the motorist is required; Minister Gordhan announced that the fuel tax would rise by 20 cents from April 1. With an 8c-a-litre rise in the Road Accident Fund (RAF) levy, the average South African will be paying approximately R330 in fuel tax a month as from April 1 2012. 3.3.5) Environmental Impact Assessment (EIA) The EIA for the projects was complete in 2007, and the feasibility study to implement the project as a “user-pay project,” was complete. Due to the environmental impact, CO2 emissions were a high focus point on the agenda. Worldwide, focus is to reducing CO2 vehicle emissions, which contributes to global warming. In general, traffic congestion influences the quality of life. It has the potential to stifle development opportunities, and negatively affect the environment. The Gauteng economy needs all the support to engage in economic growth and job creation. 3.3.6) Monitoring and Communication infrastructure improvement Median lighting, and Intelligent Transport Systems (ITS) will be installed and complement the freeway road-surface upgrade. A communication network comprising of Variable Message Signs (VMS), CCTV cameras and Incident Management Services will also be part of the project. This will allow SANRAL to optimally manage the national road network in Gauteng. SANRAL can control and communicate traffic conditions to road users via the VMS system in real-time. The CCTV cameras will capture road traffic footage and emergency services can be communicated to respond timeously to accidents. “The VMS system has already been piloted and in service since 2006 on the Ben Schoeman between Johannesburg and Tshwane,” (APA, 2010). The province will also focus on the promotion of public transport through the proposed Bus Rapid Transport Scheme (BRT). This involves high independent occupancy vehicle lanes for buses," (Chicago, 2010). 3.3.7) Soccer World Cup 2010 influence on the GFIP The construction should be complete by May 2010. The construction did not go according to schedule. There were lengthy delays; work stopped for a three-month period to allow unimpeded traffic flow during the FIFA 2010 World Cup. W 3.3.8) User-pay principle (Toll Road) It was decided that the project could be financed on the “user-pay principle.” Irregularities were noted in the Tender award process. The “intent to toll” was awarded prior to completion of the tender process. According to SANRAL, "Tolling will take place via an open road toll system, meaning that all transactions will take place fully electronically at toll collection locations identified for the network. Therefore, no physical toll plazas will be constructed, and vehicles will not be required to stop or even to slow down, for tolling to take place”, (APA, 2010). The photograph showing then toll point gantries which have transponder sensing technology for automated vehcile billing. Vehicles will be fitted with a “transponder” and as the vehicle passes under gantries, an automatic transaction will be recorded. Vehicles of day visitors, rental vehicles and/or those not having transponders will be photographed and accounts will be forwarded for payment. Non-payment of toll fees will be a traffic offence, and fines via the AARTO system will be imposed, (APA, 2010). W 3.3.9) Economic projections for Gauteng The GFIP’s mission is to stimulate growth of the Gauteng region, by contributing an estimate of R29 billion to the economy. Majority of this money would be spent on infrastructure development and employment, the hope of bringing a better life for the people of the region. 4) Conclusion From the information provided, on the motorist’s fees and tax contribution to the revenue of South African (SA), I hope that this is informative providing one a better understanding of the various fees and taxes. Most importantly, that one understands for what this revenue is used. The Gauteng Freeway Improvement Programme is undoubtedly the most controversial government project besides the “Arms Deal” with which it also shares a history as eluded by some parties. According to Sunday Times, “Agency (SANRAL) has refused to release publically, politically connected companies that stand to benefit,” (Rose et al, 2012: 1-2). Amongst this controversy is the Swedish company Kapsch TrafficCom, which reported by Sunday Times, “owns 40% of the main contractor Toll Consortium (ETC), ETC confirmed that until 2000, it was owned by arms company SAAB. The same SAAB who paid R24 million bribe to supply the Gripen jets to SA in the arms deal,” (Rose et al, 2012: 1-2). Great parallels can be drawn between the GFIP and another Toll Road referred to by the Sunday Times as, “the forgotten toll Road,” (Clarke, 2012:1-2). This toll road located in the Eastern Cape, “A toll road linking the titanium rich deposit mineral sands with an Australian Company MRC,” (Clarke, 2012:1-2). In the end, both toll roads meeting the same fate. With all good intentions and probably extremely lucrative business deals, there has been gross oversight concerning the affordability of the end user, the motorist. What will the final impact be on the motorist, still remains to be answered' W References Khd K d h d K W W D h ' d K ' d W W W D W W     ZWh>/ K& ^Khd, &Z/ ZWh>/ K& K W W D ^ EZ > K / W ^ &  W D K & K ^ E D D^ / K  ^ D  D E d/KE > ZK ^ 'Ez d K& E K Z ^ Z K K  ' K d K  W D   ZWh>/ K& ^Khd, &Z/ K   : ' /  W  ^ Z d Z ^ D K W  D/   / d Z^/'E d/KE K& E /Z >>/ ^ EZ > K ' ^d dDEd ' d K ' ' ' ' D ' Z Z ^ W/ d Z t ' Z E &  ^ Z E ' Z > ^ EZ >  d ' E K  d  d ' d dZ E^WKZd D/E/^dZ /E^dZhd^ ^ EZ > dK , >d tKZ< KE dK>> ZK ^ :W^ D/ ^d dDEd D D t D  , ^ ^ W Z E / Z ' ^ d K D ^ Z K > d ^ D /  W W